Southern States Forwarding, Inc.

Ocean Forwarding 101

This is one of a group of informative pages on this web site which
we are providing for the benefit of people and companies who use
the services of Freight Forwarders and Customs Brokers such as
ourselves. See also: Glossary Soon to come: Example of OCP vs. IPI shipments

Ocean Forwarding 101

Ocean forwarding for commodities is one of our functions. Here's
a brief overview of what we do for ocean shipments.

A forwarder is like a travel agent for cargo. Our job is
relatively complicated, and lawmakers usually are not helpful
because "cargo does not vote".

A forwarder must be licensed by the Federal Maritime Commission
(FMC). This requires a background check covering experience and
references, and a bond. (Check the FMC home page for all the details.)
According to the FMC, on every shipment we must certify we have no
beneficial interest in the shipment, we hold a valid FMC license,
and we... "have performed the following services:

Engaged, booked, secured, reserved, or contracted directly with
the carrier or its agent for space aboard a vessel or confirmed the
availability of that space, and

Prepared and processed the ocean bill of lading, dock receipt,
or other similar document with respect to the shipment."

In addition to the above, a forwarder must have power of attorney
for his customers so when performing the above services, he can
act on their behalf, speaking and contracting as if he were an
employee of the customer.

An ocean bill of lading (B/L) is the most important document we
handle. The ocean B/L carries title to the goods. Many of the
overseas shipments are arms length transactions where you need to
be careful. The person who first presents an original B/L,
properly endorsed, will receive the goods at destination. Here's
an example of how a transaction works. USA company sells widgets
to China company. They sign a sales contract. The contract
instructs China company to open an irrevocable letter of credit
(L/C) in favor of USA company. China company guarantees payment
to its China bank, and sends the L/C to USA Company. USA company
satisfies the requirements of L/C, and presents all documents
including a "bankable" B/L in exchange for cash from its USA bank.
USA bank sends all to China Bank in exchange for cash, and China
Bank gives China company the B/L so they then take possession
(title) to the shipment of widgets.

The second most important document we handle is the Shipper's
Export Declaration (SED). A few years ago these had to be typed
in triplicate on a special form. Today we do this electronically.
Essentially we are reporting who shipped what to whom, all the
details of the shipment, and what it was worth.

There are voluminous amounts of additional documentation that
can go with a shipment. Depending on what you ship and where you
ship it to, there will be government specified documents required.
Some of these would be:

Certificate of Origin

Hazardous Goods Declaration

Sanitary or Phytosanitary Certificates

Inspection reports

Insurance certificate

Notification of Shipment

Fumigation certificate

Carrier Certificate

Today there are basically two types of shipments: Breakbulk
and Containerized. About 90% of the cargo handled today is
Containerized. Containers are easier to handle, and they keep
the merchandise cleaner and safer. If you enter into a Breakbulk
shipment contract, please read the charter agreement carefully.

The terms under which the cargo is transported are complicated.
There is contract carriage where you have a contract which
essentially is part of a ship charter. The other type of
carriage is Common where carriers must offer space to all,
and the price charged must be what they have published in their
tariff. BEWARE, it does not matter what you were quoted for ocean
transport, you will be liable for the rate published in the tariff.
Further, regardless of who has a B/L, the carrier should not
release the cargo until it has been paid.

A forwarder can do more than documentation. He should be able
to shop for rates and give advice. His expertise and document
processing should be worth more than he charges.